Property Portfolio Or Pension? Which Is Best?

There is little doubt that most governments will be keen to see more people saving for retirement. With an ageing population and large debts to pay, the burden on their finances has probably never been higher.

So what are the options for you and me?

A pension? A savings account?

A few weeks back my bank manager called me and said he would like to meet with me for a chat. This doesn’t happen often, the only time I hear from your bank is when my account has nudged too far into the red.

Fortunately this was a friendly chat.

Anyway I decided to go along and see what they had to offer and if they could offer anything that would make my money work harder.

I was disappointed.

Interest rates are at historic lows meaning that the reward for locking my money away is simply not worth the effort or sacrifice. Even when the bank could offer something with a reasonable return, I was told that I was a day too late and, even if I had not been, I would still have needed to wait five years to see any return.

The alternative is to put money away in a pension. Yet the story of the moment is how little we’ll get from our pension when we retire. It is no coincidence that we are seeing more and more people out on the streets protesting about their pensions.

This is nothing new, have pensions ever lived up to their promises? There was Robert Maxwell, Enron, then endowment policies. All of these left people in disastrous positions.

Even if we did have £300,000 in our pension pot it is only likely to provide an annual income of just £18,000. This is less than you would get for stacking shelves in a supermarket.

So as the usual safety nets appear to be collapsing around us, where should we invest our hard earned money?

To be worthwhile it needs to be in a place that will generate good cash-flow and provide an income without having to lift a finger even after we retire. This investment will continue growing even after retirement so that we will never need to worry about the money running out.

The investment I am talking about is aproperty portfolio. Of course if you follow the media and think short term, then you may get caught up in boom and bust cycles, however if you have a long-term plan and stick to it, a portfolio of properties will help you achieve your retirement goals.

Property is an appreciating asset in the long term as history has shown. As long as the tenant pays the bills and covers all your costs and perhaps more in those early years you will be well on the road to building a property portfolio with the profits you make on each investment.

It must be remembered that building a property portfolio is a serious business, you will be responsible for two or more investment properties and those early days will be the ones where the most work is required.

Other than that the size of your property portfolio will be limited only by the scale of your ambition and the energy you have.

For example you could be investing in one of the hottest cash-flow markets in the world right now – Atlanta.

I use this example as it is 50% more expensive to rent than it is to buy at the moment in this city.

Here you could buy six three-bedroom townhouses priced from $59,900 / £37,000 and within just 30 days, you can be earning $4,212 every month doing nothing.

Of course not every market will offer this kind of cash-flow, if this was the case then we would all be millionaires, however what this proves is that by building a portfolio in a well-chosen location, you can comfortably avoid future uncertainty about pensions.